The Federal Reserve's fight against inflation is far from over, which means market volatility will likely remain the norm for 2023. Fed chairman Jerome Powell said in an interview with The Economic Club, "The disinflationary process has begun," but it's going to take "not just this year but next year to get down to 2%." The 2% mark is the Fed's preferred level of inflation. Currently, the United States economy is running at around 6.5% according to the December 2022 report from the Labor Department.

Powell noted the "extraordinarily strong" January jobs report which showed 517,000 nonfarm payroll jobs were added for the month while unemployment moved to 3.4%. A tight labor market like this typically means wages go up which adds fuel to rising inflation. Of the labor situation, Powell said, "If we continue to get, for example, strong labor market reports or higher inflation reports, it may well be the case that we have to do more and raise rates more."

The markets were initially positive in response to Powell's comments but all three major indices posted a loss at the end of the day. Yields on the 10-year Treasury note fluctuated in a range of 3.65% to 3.68% for most of the week, about 10 basis-points higher than the first week of February. 

The latest Freddie Mac 30-year fixed-rate mortgage average rose slightly to 6.12% with Freddie Mac economists saying the upward movement stemmed from the Fed's rate and the strong jobs report. The good news is, rates have been stable enough to bring more borrowers back into the fold. "The 30-year fixed-rate continues to hover close to six percent," Freddie Mac said in the release, "and interested homebuyers are easing their way back to the market just in time for the spring homebuying season."

That desire was once again reflected in the Mortgage Bankers Association's mortgage application weekly survey. The MBA's report showed both refinance and purchase activity increased month-over-month by 18% and 33.9%, respectively. Year-over-year, refinance activity was down 75% and purchase activity was down 37%. MBA Vice President and Deputy Chief Economist Joel Kan said in the release "The 30-year fixed rate is almost a percentage point below its recent high of 7.16 percent in October 2022. Both purchase and refinance applications increased last week and have shown gains in three of the past four weeks because of lower rates."

Price is still a factor for many would-be homebuyers as the MBA notes the average loan size on a purchase moved up to $428,500. That's the largest average since May 2022. Kan said, "This increase is a sign that the recent upward trend in purchase activity remains skewed toward larger loan sizes and less first-time homebuyer activity, as entry level housing remains undersupplied, and buyers struggle with affordability in many markets."